It's Official: Microsoft Concedes the Smartphone War

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It's Official: Microsoft Concedes the Smartphone War

Another day, another company-wide memo in which Microsoft CEO Satya Nadella slices his company's headcount to bits.

In a note to employees—and really, to the rest of the world, too, since it was published in Microsoft's press center—Nadella announced another 7,800 job cuts, which will primarily hit Microsoft's phone business. That's in addition to the whopping 18,000 jobs Nadella last year said he planned to cut, mainly employees who had joined Microsoft through its acquisition of flailing phone company Nokia.

All in, this amounts to the loss of around one fifth of Microsoft's total global headcount, symbolizing a swift and stunning admission by Nadella that if Microsoft can't compete with the big dogs like Apple and Samsung in the smartphone wars, it's better off bowing out. "We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family," Nadella writes.

Roughly translated, that means that while Microsoft doesn't plan on killing its phone business altogether, it does plan on paring it down substantially to align with Microsoft's new focus on productivity. From now on, Nadella writes, the phone business will focus on three main categories. "We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love," he writes.

The development of these products will happen within a new business unit called the Windows and Devices Group, which Nadella announced in a similar memo just a few weeks back. At the time, Nadella also announced the departure of top ranking Microsoft executive, Stephen Elop, who had run Microsoft's devices unit. It was just one of many signs that Nadella believes devices no longer deserve their own business unit and leadership team within the new Microsoft.